Cambodia gives region ‘export’ advice

A look inside one of Cambodia’s 500 garment factories. The Kingdom’s garment sector is a model for Southeast Asia’s developing economies, insiders say. Photo Supplied

By Don Weinland
Tuesday, 03 April 2012
Phnom Penh Post

Cambodia's garment sector yesterday looked more like a teacher to regional economies such as Myanmar than a student of China and other export juggernauts.

With more than 500 garment and shoe factories – adding a new one every 10 days, according to the Garment Manufacturers Association of Cambodia – the Kingdom drew the attention of officials from Myanmar and Laos yesterday at a business-to-business dialogue hosted by the ASEAN-EU Business Summit.

“I always give Cambodia as an example to people in my country. The garment sector here has made so much progress in the past 10 years,” Khine Khine Nwe, secretary general of the Myanmar Garment Manufacturers Association, told the Post on the sidelines of the meeting.

“To be frank, we have to learn from many countries, not just Cambodia. We’re still at the first stage of development.”

Myanmar-bound

Myanmar is no newcomer to the industry.

In 2001, garment exports from the Southeast Asian nation were worth US$767.6 million, with the United States its biggest customer, according to Khine Khine New.

Cambodia exported about $1.16 billion the same year.

But US sanctions against Myanmar’s military-led government saw a more than 60 per cent decrease in the value of exports by 2005, as Cambodia’s sector experienced nearly 90 per cent growth during the same time period, Garment Manufacturers of Cambodia figures showed.

Although Myanmar’s exports last year recovered to near-2001 levels on trade with Japan and Korea, the value of Cambodia’s total garment exports was about 335 per cent higher than the regional neighbour in 2011.

Lao speculates success

The Lao People’s Democratic Republic was also interested in Cambodia’s success in the sector.

The World Bank projected that garment-driven exports in Laos would grow by 15 per cent in 2011.

Laos’s landlocked, low-population status detracted from the country’s appeal as a manufacturing destination, but officials will continue to study other regional successes for tips on attracting investment, Somphone Phonhaxa, a representative from the Lao National Chamber of Commerce and Industry, said at the discussion on Cambodia’s exports yesterday.

“We need to know what we must change to attract investors into this sector. I think we can learn some of that from Cambodia,” he said.

'Don't be afraid'

President of the Garment Manufacturers Association of Cambodia, Van Sou Ieng, yesterday recommended Myanmar exporters call on their customs offices for speedy clearance of imported materials, as well as improvements on inland logistics.

Bluntness with Myanmar’s new government was the overarching theme of yesterday’s lesson.

“[The manufacturers] need to tell the government what they need. Don’t be afraid,” Van Sou Ieng offered as advice to Myanmar on the sidelines of the meeting yesterday.

Cambodia and Myanmar both lack local textile manufactures that supply garment factories with raw materials.

Instead, the two countries import almost all of the fabrics used in production, a step in the manufacturing chain subject to logistic risks and unfavourable fluctuations in currency.

In this sense, Cambodia still has room to learn from other regional players such as Bangladesh, which manufactures much of its own textiles, Gordon Peters, manager at Emerging Markets Consulting, said yesterday.

About 90 per cent of Cambodia’s garment factories are foreign owned, leaving little incentive to invest in the domestic value-added process, Peters said.

Twenty-three of Myanmar’s 100 or so factories were foreign-owned, Khine Khine Nwe said.

Political push-back

Ultimately, investors interested in Myanmar would wait for a greater sense of political stability before putting their money in the country, experts told the Post last week.

Parliamentary elections in Myanmar on Sunday saw Aung San Suu Kyi’s National League for Democracy Party win 44 out of 45 seats, Reuters reported yesterday.

“The rule of law in Myanmar is still weak. Investors would like to see stronger rule of law before they start coming,” Khine Khine Nwe said.
To contact the reporter on this story: Don Weinland at don.weinland@phnompenhpost.com